India approves foreign investment in retail, aviation

New Delhi, Sep 14 (IANS) The UPA government Friday allowed 51 per cent in foreign direct investment (FDI) in multi-brand retail, triggering outrage among some of its allies as well as the opposition.

The decision paves the way for the global retail giants like Walmart and Carrefour to open their stores in India.

The cabinet also decided to allow up to 49 per cent overseas investments in the aviation sector, giving wings to cash-strapped Indian carriers, and dilute sourcing norms in order to attract greater investments in single-brand retail.

Ally Trinamool Congress joined the angry chorus of the Bharatiya Janata Party (BJP) and the left to denounce the move, which the government insisted would not hurt Indian interests.

BJP and Communist leaders called the decision a “betrayal” of people’s interests.

“This is a complete betrayal, also of parliament,” BJP MP Balbir Punj said. Communist Party of India’s D. Raja said a corruption-tained regime was trying to salvage its image.

West Bengal Chief Minister and Trinamool Congress Mamata Banerjee was furious and said she would not stand for it.

As criticism mounted, Commerce Minister Anand Sharma defended the sweeping policy change, viewed as a major step to spur economic reforms.

“It is not a sudden decision,” Sharma told the media, explaining the decisions taken Friday evening by the Cabinet Committee on Economic Affairs chaired by Prime Minister Manmohan Singh.

Announcing the decision at a news conference after the cabinet meeting, Sharma said the government had tried to build consensus on the issue of allowing FDI in multi-brand retail.

The cabinet, in November last year, had decided to allow up to 51 percent FDI in multi-brand retail. But the move was kept in abeyance following protests from opposition as well as some of the allies of the ruling United Progressive Alliance (UPA), especially the Mamata Banerjee-led Trinamool Congress.

Sharma said it would be up to the state governments to decide whether they want to allow the overseas retailers to operate in their territory or not.

The minister claimed that the majority of the state governments including Andhra Pradesh, Haryana, Delhi and Maharashtra were in favour of allowing overseas investments

He said the states like Orissa, Bihar and West Bengal were opposing the move.

“We have tried to build consensus. This is an enabling provision. States who wish to do so have the right to do so. Those who have reservations, they have the discrition not to implement it,” Sharma said.

Sharma said the Department of Industrial Policy and Promotion (DIPP) would soon issue notification for implementation of the cabinet decisions.

“This is a policy decision. DIPP will notify it. I assure you that there won’t be any delay,” he added.

The cabinet also decided that overseas retailers setting up a single brand store in India must source at least 30 percent of their goods from Indian companies, preferably from micro, small and medium enterprises (MSME).

Earlier it was mandatory for the overseas firms to source 30 percent of the goods from MSME.

“On the condition of 30 percent sourcing from MSME, it was felt that more clarity was required. Thirty percent sourcing will be done from India, preferably from MSMEs,” Sharma said.

India Inc welcomed that government’s decision on relaxing the norms of allowing FDI in retail and aviation sector saying it would help revive growth and boost business confidence.

“There are several benefits that would flow from this decision. We will see infusion of new technology across the agriculture value chain as well improvement in the back end infrastructure,” said R.V. Kanoria, president, Federation of Indian Chambers of Commerce and Industry (FICCI).

“There will be a multiplier effect in terms of employment generation and domestic manufacturers will benefit as they integrate with the supply chains of global retail majors. Consumers will have a wider choice and get better deals,” he said.

IANS 2012-09-14 19:47:48